Annexe D

Financial appraisal

Example 1 -
Type 1 project (tender stage)

This example is based on a new build project of 10 properties,
where the project receives tender approval after 12 May 2009. At
tender stage, it is assumed that each owner will take a 60 per cent
equity stake in a property. The District Valuer has valued each
property at £110,000.

Scheme costs

£

Land acquisition

104,500

Works

750,000

Fees

75,000

Other costs - including capitalised interest charges
(see note 1)

34,173

Development allowances (see note 2)

36,327

Total costs

1,000,000

Funding breakdown

£

Owner (see note 3)

660,000

Grant (see note 3)

340,000

Total costs

1,000,000

Note 1

The grant provider will accept capitalised interest
charges arising from any projected development period
borrowings as a legitimate capital cost. Estimated interest
charges should be based on the projected level and timing
of development period borrowings. In line with existing
procedures, claims for payment of grant for capitalised
interest charges should be substantiated by documentation
from the registered social landlord’s lender
confirming the amount of interest actually charged.

Note 2

Development allowances are calculated as follows:

£

Allowance per project

13,827

Allowance per new unit (10 x £691)

6,910

New Supply Shared Equity allowance (see note 4)

15,590

Total development allowances

36,327

Note 3

Given that owners are each expected to take a 60 per
cent equity stake in the properties and the properties each
have an open market value of £110,000, the registered
social landlord can expect to receive a total sales income
of £660,000 from owners (60 per cent of
£1,100,000). The difference between this sum and the
total cost of the project equals the required grant
funding.

Note 4

As per
HIGN
2009/05 for projects approved after 12 May 2009 the New
Supply Shared Equity allowance per unit has been reduced by
the nominal sum of £100 from the published figure of
£1,659 to £1,559 to reflect the central
conveyancing arrangement now in place.

Financial appraisal

Example 2 -
Type 2 project (tender stage)

This example involves a registered social landlord buying five
properties (at an appropriate discount) from a private developer.
The project receives tender approval after 12 May 2009. At tender
stage, it is assumed that each owner will take a 75 per cent equity
stake in a property. The District Valuer has given each property an
open market valuation of £120,000.

Scheme costs

£

Property acquisitions

500,000

Other costs (including capitalised interest charges)
(see note 1)

14,923

Development allowances (see note 2)

25,077

Total costs

540,000

Funding breakdown

£

Owners (see note 3)

450,000

Grant (see note 3)

90,000

Total costs

540,000

Note 1

The grant provider will accept capitalised interest
charges arising from any projected development period
borrowings as a legitimate capital cost. Estimated interest
charges should be based on the projected level and timing
of development period borrowings. In line with existing
procedures, claims for payment of grant for capitalised
interest charges should be substantiated by documentation
from the registered social landlord’s lender
confirming the amount of interest actually charged.

Note 2

Development allowances are calculated as follows:

£

Allowance per project

13,827

Allowance per new unit (5 x £691)

3,455

New Supply Shared Equity allowance (see note 4)

7,795

Total development allowances

25,077

Note 3

Given that owners are each expected to take a 75 per
cent equity stake in the properties, the registered social
landlord can expect to receive a total sales income of
£450,000 from owners (75 per cent of £600,000).
The difference between this sum and the total cost of the
project equals the required grant funding.

Note 4

As per
HIGN
2009/05 for projects approved after 12 May 2009 the New
Supply Shared Equity allowance per unit has been reduced by
the nominal sum of £100 from the published figure of
£1,659 to £1,559 to reflect the central
conveyancing arrangement now in place.

Financial appraisal

Example 3 -
Type 3 project (tender stage)

This example is based on a five property new build project,
which receives tender approval after 12 May 2009. As the project
involves existing owner occupiers whose homes are scheduled for
demolition, it is assumed at tender stage that each owner will take
an equity stake equivalent to the value of their existing home. The
District Valuer has valued each of the existing properties at
£40,000 and has valued each of the new properties at
£85,000.

Scheme costs

£

Land acquisition

50,000

Purchase of existing owners’ properties

200,000

Works

350,000

Fees

35,000

Other costs (including capitalised interest charges)
(see note 1)

14,923

Development allowances (see note 2)

25,077

Total costs

675,000

Funding breakdown

£

Owners (see note 3)

200,000

Grant (see note 3)

475,000

Total costs

675,000

Note 1

The grant provider will accept capitalised interest
charges arising from any projected development period
borrowings as a legitimate capital cost. Estimated interest
charges should be based on the projected level and timing
of development period borrowings. In line with existing
procedures, claims for payment of grant for capitalised
interest charges should be substantiated by documentation
from the registered social landlord’s lender
confirming the amount of interest actually charged.

Note 2

Development allowances are calculated as follows:

£

Allowance per project

13,827

Allowance per new unit (5 x £691)

3,455

New Supply Shared Equity allowance (see note 4)

7,795

Total development allowances

25,077

Note 3

Given that an owner is expected to take a £40,000
equity stake in a property, the registered social landlord
can expect to receive a total sales income of
£200,000 from the owners (5 x £40,000). The
difference between this sum and the total cost of the
project equals the required grant funding, and each owner
will have a 47.06 per cent equity stake in their new
property.

Note 4

As per
HIGN
2009/05 for projects approved after 12 May 2009 the New
Supply Shared Equity allowance per unit has been reduced by
the nominal sum of £100 from the published figure of
£1,659 to £1,559 to reflect the central
conveyancing arrangement now in place.

Financial appraisal

Example 4 -
Type 1 project (completion stage)

This example shows how a reassessment of grant would work at
completion stage on a 10 property development where the actual
levels of equity stake taken vary from those projected at tender
stage. The project was approved and completed in the same year. At
tender stage, it was assumed that each owner would take a 60 per
cent equity stake, whereas each owner actually took a 70 per cent
stake. The District Valuer valued each property at
£90,000.

Scheme costs

£

Land acquisition

70,000

Works

675,000

Fees

67,500

Other costs

28,673

Development allowances

36,327

Total costs

877,500

Funding breakdown at tender stage

£

Owners (see note 1)

540,000

Grant (see note 2)

337,500

Total costs

877,500

Funding breakdown at completion stage

£

Owners (see note 3)

630,000

Grant (see note 3)

247,500

Total costs

877,500

Grant reconciliation

£

Grant approved at tender stage (see note 4)

337,500

Grant approved at completion stage (see note 4)

247,500

Difference

90,000

Note 1

Given that owners were each expected to take a 60 per
cent equity stake in the properties, the registered social
landlord expected to receive a total sales income of
£540,000 from owners (60 per cent of
£900,000).

Note 2

The difference between the anticipated sales income and
the total cost of the project equalled the required grant
funding at tender stage.

Note 3

Instead of each owner taking a 60 per cent equity stake
in a property, each owner actually took a 70 per cent
stake. Given that the properties each had an open market
value of £90,000, the registered social landlord
received a total sales income of £630,000 from the
owners (70 per cent of £900,000). The difference
between this sum and the total cost of the project equals
the actual grant funding required.

Note 4

The difference between the grant approved at tender
stage (£337,500) and the grant required at completion
stage (£247,500) is £90,000. The registered
social landlord must repay this sum to the grant
provider.